Free Advice Given and No Contract? You May Be Liable

August 8, 2017

Free Advice Given and No Contract? You May Be Liable

Any professional will know that there are many people who like to have free advice, and whilst this is seldom proffered in a social setting such as the pub, it is normal for friends to give one another advice.

It was therefore unremarkable when a couple who had a major landscaping project to do used an architect friend with expertise in that area – whom they had provided with free graphic design work and office space in the past – for guidance on the project.

It turned into a disaster and the end of the friendship. The couple sued the architect for damages. Although there was no binding contract, the Technology and Construction Court found the architect liable (in the law of tort) because she had failed to use reasonable skill and care in relation to the project.

The architect's appeal against that decision was heard in the Court of Appeal in April. She argued that she owed the couple no 'duty of care'. She lost. The relationship was not wholly informal or social: it was professional. She knew the couple would rely on her and thus had a duty to exercise her role with appropriate care and skill. Failure to do so could lead to a foreseeable loss for them, as indeed turned out to be the case.

This case will ring alarm bells for any professional person. Not only can there be liability without a contract, but it is quite likely that a professional indemnity policy would not cover a loss occasioned in circumstances such as this.

A binding agreement containing a 'limitation clause' on the architect's liability would be a common means of limiting potential claims and might have provided a system for resolving the conflict in a way less ruinously expensive than a hearing in the Court of Appeal. For the winners in such cases, the long stop may well be the assets of the professional, not the professional's insurer. In many cases, full compensation will not be achievable.